9.30 pm

Given the changes we are seeing in the financial services market—including the activities of groups such as Tesco and the arrival of Virgin—we must ask whether there is a danger of an unlevel playing field for other providers in which some are subjected to consolidated supervision whereas others are not. More importantly, it gives rise to questions for consumers. Are they duly protected? Are those bodies that are not subject to consolidated supervision able to use their market intelligence in particular ways? Can they use their business, market and customer relationship with many people to the disadvantage of either consumers or other players?

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New clause 13 makes provision for what would happen so long as the Government wanted to go along the lines outlined in clause 25, which would allow the Treasury to amend the legislation by order in future and therefore change the qualification for financial institutions. If the Treasury were to say that that was to be the future proofing against other market changes, I would want it to be subject to regular review and assessment that would be brought before this House. The new clause therefore provides that the powers given to the Treasury to amend the legislation would be the subject of a review within the first year after the Bill received Royal Assent and of annual assessments after that. The power in the Bill to reconsider these matters rests entirely with the Treasury and not the regulators, whom we would assume would hear from other practitioners and from the consumers. The new clause creates a proper scenario of assessment by the regulators and the Treasury.

I have put my name to other amendments in this group which also address consumer interest. They concern some of the language that would be used and expected as regards consumers as well as the status of the consumer panel. We are told that there will be a consumer panel for the FCA, but it is given no remit as regards the PRA, even though on some measures the FCA will have a duty to co-ordinate with the PRA. Some of those issues will, clearly, be about consumer interest. There is not the same scrutiny, comeback or advocacy for consumers built into the provisions for the PRA as there is for the FCA, and so a number of the other amendments would address that, not least amendments 69 and 70.

Amendment 71 provides for improvements in the duty to co-ordinate between the FCA and the PRA. As I read the Bill, the duties on them to co-ordinate relate to their own interests and considerations. They are meant to consider what matters to them and to each other. I do not think enough is built in about the regard they are meant to have for the impact of their collective or separate efforts on firms that are subject to dual regulation. Nor is there sufficient emphasis on their having proper regard to consumer interest.

This group of amendments is not just about governance and the relationship between the democratic process and regulation. It also goes to the heart of what regulation should be about, which is protecting the consumer interest and ensuring fair play in the marketplace.

Guy Opperman:
It is a pleasure to speak in this debate, albeit briefly. Like Mark Antony in “Julius Caesar”, I come to praise the Bill, not to criticise it. I accept that the Government are all honourable men and women, but so, it might be reasoned, are the members of the Treasury Committee, who are also honourable men and women, advancing a slightly contrary view.

I support the fundamental ethos of clause 1 and welcome the review of the performance of the Bank of England. I certainly do not support Opposition amendment 28, which would remove clause 5; that would be entirely wrong in the present circumstances. I speak as a critical friend of the present system and as the secretary of the all-party group on the Arch Cru Investment Scheme, which is seeking to recover compensation for the thousands of men and women in this country who have lost their lifetime savings. What happened to them is manifestly wrong, and anything that this House can do to strengthen the regulatory system to prevent such disasters, I welcome wholeheartedly.

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I speak also as an MP who, almost every week, has a constituent come to me saying that they are unable to obtain bank lending and finance. That is because of the lack of competition in the present banking structure—an issue that is raised regularly. I urge the House to embrace greater competition and to open up the market to competitors to the existing large banks, which will be in a position to provide the bank finance sought by businesses up and down the country.

The other end of the telescope must also be addressed. At present, we have the large banks, but there are no small banks. Germany and America have local banking structures that work tremendously positively: individuals can set up local banks, which provide for a community purpose above all else, which is manifestly a good thing. That is why I support wholeheartedly the competition objectives set out in new section 1E of the Financial Services and Markets Act 2000, inserted by clause 5, which states that there should be an emphasis on

“the ease with which new entrants can enter the market, and…how far competition is encouraging innovation.”

I have met the chairman of Metro bank, which is that remarkable thing: a bank set up to exist at the weekend. It opens on weekends and at 8 o’clock in the morning. Imagine what could be done if we had that at the local level.

I am grateful for what Hector Sants, the present chief executive of the FSA, told me in a letter dated 12 March:

“We are conscious of the balance to be struck between ensuring high standards at the gateway, and the importance of allowing innovation and appropriate levels of access for new firms.”

The letter continues:

“there has been public debate about the potential advantages of new entrants in the area of small, regional banks focused on servicing the SME sector. In such cases we will be proportionate in our approach and would invite all firms with a viable business model and appropriate levels of resources to a pre-application meeting to help guide them through the application process”.

The Bill will, I suggest and sincerely hope, make it easer to establish local banks, which can only be a good thing.

Kelvin Hopkins:
I rise to express my strong support for the amendments in the name of my hon. Friend the Member for Hayes and Harlington (John McDonnell).

There are two components of the argument: the first is the relationship between the Governor of the Bank of England and the Government, but the second is the relationship between this House of Parliament and the Government. On both, I strongly believe my hon. Friend has a point. Like him, I was unhappy about the decision to hand power over monetary policy to the Bank of England and give it independence. All aspects of macro-economic management ought to be matters for Ministers accountable to Parliament. I maintain that view and, in a sense, recent events have proved that my hon. Friend and I were right. I thought at the time that if the Governor of the Bank of England or the Monetary Policy Committee chose to be hawkish on interest rates when we had a recession on our hands, there could be a serious conflict between the Bank and Government. Fortunately, the Bank has been sensible in managing monetary policy and that clash did not occur, but it could have happened in 2008. Had the Bank been governed by a hawkish Governor, we could have seen a serious clash and those powers no doubt taken away. I was comforted by the thought that if the Bank of

23 Apr 2012 : Column 763

England got out of control, we could easily take back powers. It is not the same with the European Central Bank, where powers have been given away and cannot be taken back.

In relations between Parliament and Government, pre-appointment hearings have been shown to be a success. I have been involved in not just the two most recent pre-appointment hearings, but in developing the arguments in favour of pre-appointment hearings as a member of the Public Administration Committee for the past 10 years. Brilliant work was done by Tony Wright, who made a real impact on our constitution. Pre-appointment hearings are first class. They are not just an experiment; they are here to stay. I would like the Governor of the Bank of England to be subject to a rigorous pre-appointment hearing so that we know that they will serve the economy and relate to the House, and not just be a law unto themselves. I have probably run out of time. I know the Minister needs to speak, but I have made my point.

Mr Hoban:
This has been a thoughtful and constructive debate covering the wide range of issues in this group of amendments. I shall organise my remarks in two parts. I shall deal first with issues relating to the Bank of England and the Financial Policy Committee, and secondly with the Prudential Regulation Authority and the Financial Conduct Authority.

I begin by speaking to Government amendment 12. This change was prompted by an amendment proposed in Committee by the hon. Member for Nottingham East (Chris Leslie), on the wording used to ensure that the view of the Treasury member of the FPC cannot be taken into account in determining whether the FPC has reached a decision by consensus. Although the substance of the provision, which is consistent with the general principle that the Treasury member of the FPC should not have a vote, was endorsed by the Committee, some members of the Committee thought that the wording was ambiguous. Some, including the hon. Member for Foyle (Mark Durkan), felt that the current wording could imply that the Treasury is not even allowed to exercise influence through debate or discussion.

I therefore committed to look again at the wording to see whether it could be made clearer. Amendment 12 amends the provision to make it clear that in determining whether the FPC has reached consensus, the chair should disregard “any view expressed” by the Treasury member. This does not mean that the Treasury member cannot influence the discussion and debate, but in determining consensus, that voice should not be taken into account.

The main focus of the debate has been accountability and transparency. That is absolutely right. Hon. Members are right to highlight the fact that as a consequence of the Bill, the Bank of England takes on more power and responsibility, partly because the PRA becomes part of the Bank family, and through the creation of the FPC. It is right that we strengthen the transparency and accountability of the Bank as a consequence of the reforms before us. The debate about macro-prudential tools was a helpful way of characterising that debate and talking about some of the proposals that we have made. We are committed to ensuring the ex ante approval

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of those macro-prudential tools by this place and the other place. Hon. Members are right to call for a review of the use of those tools and a retrospective review of the Bank’s performance. That is important too.

Let me deal first with the ex ante side of the equation. Amendment 22 talks about economic growth being part of the FPC’s objective. The Government are clear that the FPC’s principal aim should be to make the financial system safer and more stable. We do not seek the stability of the graveyard. The FPC should not be able to pursue stability to the point where the financial sector can no longer support the real economy. This means that the FPC should not be able to take action that would seriously damage the ability of the financial sector to contribute to growth in the medium to long term and the FPC should consider whether the costs of the action that it proposes would be disproportionate to its benefits. The Bill as drafted already ensures this.

9.45 pm

The economic growth element in the FPC’s objective is stronger and more restrictive than the growth element in the MPC’s objective. The MPC’s secondary objective

“to support the economic policy of Her Majesty’s Government”

is subordinate to the primary objective to maintain price stability. This means that the MPC need only pursue its secondary objective if it has no impact on price stability. In contrast, the economic growth “brake” imposed on the FPC by new section 9C(4) is an absolute prohibition. The FPC cannot in any circumstances take action that would have a significant adverse effect on the ability of the financial sector to contribute to the sustainable long-term economic growth of the economy, regardless of the impact on stability. There is a strong element in the FPC’s objectives to get right the balance between stability and growth.

Amendment 23 relates to the super-affirmative procedure for statutory instruments on macro-prudential tools. The Government agree that public and parliamentary scrutiny of macro-prudential tools is important. The Bank has already consulted on tools and made public recommendations to the Treasury. The interim FPC has recommended to the Treasury that the statutory FPC be given the following three tools: the counter-cyclical capital buffer, sectoral capital requirements and a leverage ratio. That was in a document that it published in March. The Government are considering those recommendations and will consult publicly on their proposals for the FPC’s initial toolkit during the passage of the Financial Services Bill. The Government will aim to maximise the amount of scrutiny available to Parliament. The secondary legislation itself will, as recommended by the Treasury Committee, be subject to approval by both Houses of Parliament, as will any changes to it to reflect changes to the FPC’s toolkit. Therefore, strong arrangements are in place to ensure that there is public and parliamentary engagement in determining the macro-prudential tools that should be available to the FPC.

Mr Tyrie:
I realise that the Minister will not want to commit himself to change anything now, but would he be prepared to say now that he would consider looking at the possibility of going a little step further than the affirmative procedure in some measure towards something that we would recognise as a super-affirmative procedure for these measures?

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Mr Hoban:
My hon. Friend makes an important point. We need to ensure that the right scrutiny arrangements are in place, but we also need to recognise that the super-affirmative procedure can create delays, because there are times when if the House is in recess the clock stops, so there is a challenge there. In addition, a blanket adoption of a super-affirmative procedure may mean that even minor technical changes are subject to quite a lengthy process. The point that I would take from this debate is that we need to ensure that proper parliamentary scrutiny of these measures is in place, and that there is proper consultation with the public and a proper assessment of the economic impact of these macro-prudential tools on the wider economy. I hope that the Government’s position is clear. I am not ruling out the proposal. There are some issues with it, but we are committed to ensuring that the right procedures are in place to ensure proper parliamentary scrutiny.

I come now to the matters at the heart of new clause 1 tabled by my hon. Friend the Member for Chichester (Mr Tyrie) and his colleagues from the Treasury Committee. I agree entirely that the robustness of the Bank of England’s governance arrangements is vital. Hon. Members on both sides of the House have been absolutely right to point out that it is even more important given the expanded responsibilities provided to the Bank of England under the legislation. There is a consensus that the governance of the Bank needs to be strengthened in order better to equip it for these new roles. The court will need to adapt and evolve in order to operate as an effective governing body, able to oversee the Bank in transition and in steady state, ensuring that the Bank is adequately resourced to meet its new responsibilities, offering challenge to the Bank’s executive and supporting accountability to Parliament. With that in mind, a set of proposals has already been put forward by the Bank of England to help address these concerns.

Last year the Treasury Committee published an in-depth and thoughtful report into the accountability of the Bank. In response to that, the court of the Bank of England set out some positive and constructive proposals to strengthen its oversight of the Bank’s financial stability activities and to enhance accountability. Central to the court’s proposals is the creation of a new oversight committee for financial stability, a sub-committee of the court that will be responsible for overseeing the entirety of the Bank’s financial stability activities. This wholly non-executive committee will have access to the meetings and papers of the Bank’s policy-making committees, including the FPC, and will be able both to review the internal decision-making processes leading to policy outcomes and to commission periodic reviews of policy-making performance from expert external authorities. These reports will be published, unless publication would be contrary to the public interest. We welcome the court’s proposals.

My hon. Friend the Member for Chichester, in his remarks welcoming the court’s response to the Treasury Committee’s recommendations, recognised that there has been change, but he also outlined a number of areas in a report published on 23 January and argued that the court’s proposals did not go far enough, particularly with regard to the policy reviews. Recognising this, the Chancellor agreed with the Governor and the chair of the court that the new oversight body will be expected to commission retrospective internal reviews from the

23 Apr 2012 : Column 766

Bank’s policy makers of their own policy making and implementation performance. I think that the Bank has made some progress, but my hon. Friend raised the important question of whether the oversight arrangements should be set out in primary legislation in the Bill.

My hon. Friend the Member for Chichester also mentioned publication of the court’s minutes. The Bank has committed to publishing what it terms a record of future court meetings. It is worth pointing out that the FPC also produces what it calls a record of its meetings, which is a very full account of the debates that go on in the FPC, and we will expect a similar process to be undertaken for the court’s meetings. Let me be clear: I believe that there is a clear need for the Bank’s accountability arrangements to be strengthened through the publication of the court’s minutes and the enhanced scrutiny of the court’s work, although I believe that the changes announced by the Bank help address the concerns raised by my hon. Friend and the Treasury Committee. He made some powerful arguments that have been echoed by other members of the Committee, and we will consider further whether these arrangements should be put in the Bill. We will reflect on these matters and reconsider them when the Bill goes to the other place. I hope that that helps to reassure the House on how seriously we take these matters and our willingness to listen and respond to the concerns raised by Members during the debate, particularly the contributions made by my hon. Friend and others.

Chris Leslie:
I just want to be clear about what the Minister is saying. Is he saying that when the Bill comes before the other place for consideration he will accept retrospective reviews and publication of minutes or that he will simply consider it?

Mr Hoban:
We are clear that we want to see the court’s minutes published, which I think is absolutely vital, and that we want to see those retrospective reviews in place. The questions my hon. Friend the Member for Chichester has asked are whether we have gone far enough, whether the proposals should be in the Bill or whether we should just accept the proposal put forward by the court. Tonight I have committed to listening to those arguments—he made a powerful speech—and returning to the issue when the Bill goes to the other place.

Mr Tyrie:
Will the Minister clarify a couple more points? First, when he says that he is committed to the publication of the court’s minutes, does he mean the publication of the full minutes or only a summary record of them, which it appears is what was proposed before. Secondly, he thoughtfully suggested that the non-executives of the Bank should commission internal reviews. Will they also be permitted to look at, assess and comment on the merits of the material they receive?

Mr Hoban:
I think that it is important that the court’s non-executives perform a full role in scrutinising the Bank’s activities. They need to be able to look at the output of those reviews, consider them and express their views on them. On the issue of minutes, I will not say that we are getting into a semantic debate, because that would be unfair. What we want to do is ensure that a proper record of the court’s meetings is published.

23 Apr 2012 : Column 767

I am not sure that the minutes should necessarily be verbatim, reporting every word that everyone has said, but they should certainly be a very good summary, catching the thought processes that took place in the court and the issues that were debated and discussed, so that Parliament and stakeholders can hold the Bank to account for the way in which it has used its powers not just when it comes to the Financial Policy Committee, but in other areas. I hope that that gives my hon. Friend the reassurance he looks for on our commitment to transparency and on ensuring that we do all we can to strengthen the transparency arrangements of the Bank of England.

I am very conscious that a number of other points were made, and I want to discuss them. The hon. Member for Hayes and Harlington (John McDonnell) tabled two amendments on the appointment of the Governor of the Bank of England and Parliament’s role in it. We do not have time tonight to go into the detail of that procedure, but the Chancellor has said that there will be an open process, and having heard the debate in the House he will reflect on it when thinking about how the process should develop.

I turn to Government amendment 1. In Committee, the hon. Member for Nottingham East argued for a check on the PRA’s ability to decide not to disclose the use of its veto over the FCA. The Government accept that the PRA will always be the best placed organisation to determine whether or when to disclose the use of its veto, but there is room for an element of independent consideration when it decides against such disclosure. The Government have therefore decided to place a duty on the PRA, through amendment 1, to consult the Treasury on a decision not to disclose, and this will ensure that proper disclosures do take place.

I will respond in writing to the remarks that my hon. Friend the Member for Cities of London and Westminster (Mark Field) made on the use of skilled persons. He raised some important issues.

Alun Cairns:
Does my hon. Friend recognise the strength of a practitioners panel in relation to the PRA, given that he has already accepted the merits of a practitioner panel in relation to the FCA?

Mr Hoban:
What is important is that the PRA establishes its process for consultation with regulated firms. It is required to set out in its annual report its process of consultation.

In conclusion, this is an important part of the legislation, and I am very disappointed that the hon. Member for Nottingham East has tabled a wrecking amendment that would take the guts out of the Bill. I thought that the Opposition supported the reform of financial regulation, but they clearly do not, so I hope that if the hon. Gentleman puts his wrecking amendment to the vote the House will oppose it.

Mr Tyrie:
I am grateful to the Minister for what I have heard this evening. He has shown enough flexibility for me to feel able to withdraw new clause 1, but before I do so it is just worth my spelling out what I think I have heard.

23 Apr 2012 : Column 768

I think I have heard that we are going to have the publication of the full minutes of the court of directors, and that we are going to permit and, indeed, encourage the court—the non-executives of the Bank of England—to commission internal reviews, to assess them and to give us their assessments, made available to Parliament.

I heard also about some flexibility on whether we will go beyond the affirmative procedure when looking at macro-prudential tools. Their proper scrutiny is extremely important for millions of people in this country. Whether we will go as far as a super-affirmative procedure I do not know, but an element of flexibility has also been provided for there.

With that in mind, my intention is not to push new clause 1 to a vote. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 10

Mortgage rate forewarning

‘The Treasury shall bring forward recommendations within six months of Royal Assent of this Act requiring mortgage lenders to forewarn existing customers about potential interest rate changes and their impact on the affordability of mortgage repayments.’.—(Chris Leslie.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

The House divided:

Ayes 215, Noes 290.

Division No. 531]

[9.59 pm

AYES

Abbott, Ms Diane

Ainsworth, rh Mr Bob

Alexander, rh Mr Douglas

Alexander, Heidi

Ali, Rushanara

Allen, Mr Graham

Ashworth, Jonathan

Austin, Ian

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Barron, rh Mr Kevin

Bell, Sir Stuart

Benn, rh Hilary

Berger, Luciana

Blackman-Woods, Roberta

Blears, rh Hazel

Blunkett, rh Mr David

Bradshaw, rh Mr Ben

Brown, Lyn

Brown, rh Mr Nicholas

Brown, Mr Russell

Bryant, Chris

Buck, Ms Karen

Burden, Richard

Burnham, rh Andy

Byrne, rh Mr Liam

Campbell, Mr Alan

Campbell, Mr Ronnie

Caton, Martin

Chapman, Mrs Jenny

Clark, Katy

Clarke, rh Mr Tom

Clwyd, rh Ann

Coaker, Vernon

Coffey, Ann

Creagh, Mary

Creasy, Stella

Cruddas, Jon

Cryer, John

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Tony

Curran, Margaret

Danczuk, Simon

David, Mr Wayne

Davidson, Mr Ian

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobson, rh Frank

Docherty, Thomas

Donohoe, Mr Brian H.

Doran, Mr Frank

Dowd, Jim

Doyle, Gemma

Dromey, Jack

Dugher, Michael

Durkan, Mark

Eagle, Ms Angela

Eagle, Maria

Edwards, Jonathan

Efford, Clive

Elliott, Julie

Ellman, Mrs Louise

Engel, Natascha

Evans, Chris

Farrelly, Paul

Field, rh Mr Frank

Fitzpatrick, Jim

Flello, Robert

Flint, rh Caroline

Flynn, Paul

Fovargue, Yvonne

Francis, Dr Hywel

Gapes, Mike

Gardiner, Barry

Gilmore, Sheila

Glindon, Mrs Mary

Godsiff, Mr Roger

Goggins, rh Paul

Goodman, Helen

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Gwynne, Andrew

Hain, rh Mr Peter

Hamilton, Mr David

Hamilton, Fabian

Hanson, rh Mr David

Harman, rh Ms Harriet

Harris, Mr Tom

Havard, Mr Dai

Healey, rh John

Hendrick, Mark

Hepburn, Mr Stephen

Heyes, David

Hilling, Julie

Hodgson, Mrs Sharon

Hopkins, Kelvin

Hosie, Stewart

Hunt, Tristram

Irranca-Davies, Huw

James, Mrs Siân C.

Jamieson, Cathy

Johnson, rh Alan

Johnson, Diana

Jones, Graham

Jones, Susan Elan

Jowell, rh Tessa

Kaufman, rh Sir Gerald

Keeley, Barbara

Kendall, Liz

Khan, rh Sadiq

Lammy, rh Mr David

Lavery, Ian

Lazarowicz, Mark

Leslie, Chris

Lewis, Mr Ivan

Lloyd, Tony

Long, Naomi

Lucas, Caroline

Lucas, Ian

MacNeil, Mr Angus Brendan

Mactaggart, Fiona

Mahmood, Shabana

Malhotra, Seema

Mann, John

Marsden, Mr Gordon

McCabe, Steve

McCann, Mr Michael

McCarthy, Kerry

McClymont, Gregg

McCrea, Dr William

McDonagh, Siobhain

McDonnell, John

McFadden, rh Mr Pat

McGuire, rh Mrs Anne

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Meacher, rh Mr Michael

Mearns, Ian

Miliband, rh David

Miller, Andrew

Mitchell, Austin

Moon, Mrs Madeleine

Morden, Jessica

Morrice, Graeme

(Livingston)

Morris, Grahame M.

(Easington)

Mudie, Mr George

Munn, Meg

Murphy, rh Mr Jim

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

Nash, Pamela

O'Donnell, Fiona

Owen, Albert

Paisley, Ian

Pearce, Teresa

Perkins, Toby

Phillipson, Bridget

Pound, Stephen

Qureshi, Yasmin

Raynsford, rh Mr Nick

Reed, Mr Jamie

Reeves, Rachel

Reynolds, Emma

Riordan, Mrs Linda

Robertson, Angus

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Mr Frank

Roy, Lindsay

Ruddock, rh Dame Joan

Sarwar, Anas

Seabeck, Alison

Sharma, Mr Virendra

Sheerman, Mr Barry

Shuker, Gavin

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, rh Mr Andrew

Smith, Angela

Smith, Nick

Smith, Owen

Spellar, rh Mr John

Straw, rh Mr Jack

Stuart, Ms Gisela

Sutcliffe, Mr Gerry

Tami, Mark

Thomas, Mr Gareth

Thornberry, Emily

Trickett, Jon

Turner, Karl

Twigg, Derek

Twigg, Stephen

Umunna, Mr Chuka

Vaz, rh Keith

Vaz, Valerie

Walley, Joan

Watts, Mr Dave

Whitehead, Dr Alan

Williams, Hywel

Williamson, Chris

Wilson, Phil

Winnick, Mr David

Winterton, rh Ms Rosie

Wishart, Pete

Wood, Mike

Woodcock, John

Woodward, rh Mr Shaun

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Tom Blenkinsop and

Nic Dakin

NOES

Adams, Nigel

Afriyie, Adam

Aldous, Peter

Alexander, rh Danny

Andrew, Stuart

Bacon, Mr Richard

Baker, Norman

Baker, Steve

Baldwin, Harriett

Barclay, Stephen

Barker, Gregory

Baron, Mr John

Bebb, Guto

Beresford, Sir Paul

Berry, Jake

Bingham, Andrew

Birtwistle, Gordon

Blackman, Bob

Blackwood, Nicola

Blunt, Mr Crispin

Boles, Nick

Bone, Mr Peter

Bradley, Karen

Brady, Mr Graham

Brake, rh Tom

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Brokenshire, James

Browne, Mr Jeremy

Bruce, Fiona

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, Paul

Burt, Lorely

Byles, Dan

Cable, rh Vince

Cairns, Alun

Campbell, rh Sir Menzies

Carmichael, rh Mr Alistair

Carswell, Mr Douglas

Chishti, Rehman

Clark, rh Greg

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crabb, Stephen

Crockart, Mike

Crouch, Tracey

Davey, rh Mr Edward

Davies, Glyn

Davies, Philip

de Bois, Nick

Dinenage, Caroline

Djanogly, Mr Jonathan

Dorrell, rh Mr Stephen

Doyle-Price, Jackie

Duddridge, James

Duncan, rh Mr Alan

Duncan Smith, rh Mr Iain

Ellis, Michael

Ellison, Jane

Ellwood, Mr Tobias

Elphicke, Charlie

Eustice, George

Evans, Graham

Evans, Jonathan

Evennett, Mr David

Fabricant, Michael

Fallon, Michael

Farron, Tim

Field, Mark

Foster, rh Mr Don

Fox, rh Dr Liam

Francois, rh Mr Mark

Freeman, George

Freer, Mike

Fullbrook, Lorraine

Fuller, Richard

Garnier, Mr Edward

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Gilbert, Stephen

Gillan, rh Mrs Cheryl

Glen, John

Goldsmith, Zac

Goodwill, Mr Robert

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Greening, rh Justine

Grieve, rh Mr Dominic

Griffiths, Andrew

Gyimah, Mr Sam

Hames, Duncan

Hammond, rh Mr Philip

Hammond, Stephen

Hancock, Matthew

Hands, Greg

Harrington, Richard

Harris, Rebecca

Hart, Simon

Harvey, Nick

Haselhurst, rh Sir Alan

Heath, Mr David

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hendry, Charles

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Holloway, Mr Adam

Horwood, Martin

Howarth, Mr Gerald

Howell, John

Huppert, Dr Julian

Hurd, Mr Nick

Jackson, Mr Stewart

James, Margot

Javid, Sajid

Johnson, Gareth

Johnson, Joseph

Jones, Andrew

Jones, Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Laing, Mrs Eleanor

Lamb, Norman

Lancaster, Mark

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Jessica

Lee, Dr Phillip

Leech, Mr John

Lefroy, Jeremy

Leslie, Charlotte

Letwin, rh Mr Oliver

Lewis, Brandon

Lewis, Dr Julian

Lilley, rh Mr Peter

Lloyd, Stephen

Lord, Jonathan

Loughton, Tim

Luff, Peter

Lumley, Karen

Macleod, Mary

Main, Mrs Anne

Maude, rh Mr Francis

Maynard, Paul

McCartney, Jason

McCartney, Karl

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Mensch, Louise

Menzies, Mark

Mercer, Patrick

Metcalfe, Stephen

Miller, Maria

Mitchell, rh Mr Andrew

Moore, rh Michael

Mordaunt, Penny

Morgan, Nicky

Morris, Anne Marie

Morris, James

Mosley, Stephen

Mowat, David

Mulholland, Greg

Mundell, rh David

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Neill, Robert

Newmark, Mr Brooks

Newton, Sarah

Nokes, Caroline

Nuttall, Mr David

Offord, Mr Matthew

Ollerenshaw, Eric

Opperman, Guy

Osborne, rh Mr George

Ottaway, Richard

Paice, rh Mr James

Parish, Neil

Patel, Priti

Pawsey, Mark

Penning, Mike

Penrose, John

Perry, Claire

Phillips, Stephen

Pickles, rh Mr Eric

Pincher, Christopher

Poulter, Dr Daniel

Pritchard, Mark

Pugh, John

Raab, Mr Dominic

Randall, rh Mr John

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Reid, Mr Alan

Rifkind, rh Sir Malcolm

Robathan, rh Mr Andrew

Robertson, Hugh

Rogerson, Dan

Rosindell, Andrew

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sanders, Mr Adrian

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Simmonds, Mark

Simpson, Mr Keith

Skidmore, Chris

Smith, Miss Chloe

Smith, Henry

Smith, Julian

Smith, Sir Robert

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stevenson, John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Stunell, Andrew

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Swinson, Jo

Syms, Mr Robert

Teather, Sarah

Tomlinson, Justin

Tredinnick, David

Truss, Elizabeth

Tyrie, Mr Andrew

Uppal, Paul

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Walker, Mr Robin

Wallace, Mr Ben

Ward, Mr David

Webb, Steve

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Willetts, rh Mr David

Williams, Mr Mark

Williams, Roger

Williams, Stephen

Williamson, Gavin

Willott, Jenny

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Yeo, Mr Tim

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Noes:

Mark Hunter and

Mr Philip Dunne

Question accordingly negatived.

23 Apr 2012 : Column 769

23 Apr 2012 : Column 770

23 Apr 2012 : Column 771

23 Apr 2012 : Column 772

10.12 pm

Proceedings interrupted (Programme Order, this day).

Mr Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

Clause 3

Financial stability strategy and Financial Policy Committee

Amendment proposed: 22, page 3, line 37, after ‘functions’, insert—

‘having regard to the economic policy of Her Majesty’s Government, including its objectives for growth and employment’.—(Chris Leslie.)

‘(4A) The FCA may enter into arrangements with a local weights and measures authority in England, Wales or Scotland for the provision by the authority to the FCA of services which relate to activities that are regulated activities by virtue of—

(a) an order made under section 22(1) in relation to an investment of a kind falling within paragraph 23 or 23B of Schedule 2, or

John McDonnell:
On a point of order, Mr Speaker. The main purpose of the Financial Services Bill—

Mr Speaker:
Order. May I appeal to Members who are planning to leave the Chamber to do so quickly and quietly, so that the House can do the hon. Member for Hayes and Harlington (John McDonnell) the courtesy of listening to his point of order?

John McDonnell:
Thank you, Mr Speaker.

The main purpose of the Financial Services Bill was to secure corporate responsibility in the financial sector, and the batch of amendments that were not reached dealt specifically with corporate responsibility. May I, through you, Mr Speaker, convey a message to the Leader of the House, who is present? There will be a second day of debate on the Bill, and he may well wish to look at the programme motion again to establish whether we can debate the important elements of those amendments on that second day.

Mr Speaker:
I am grateful to the hon. Gentleman for his point of order. Let me say two things to him in response to it. First, as he can see with his own eyes, the Leader of the House is present, and will have heard what he has said. Secondly, business questions on Thursday will provide a good opportunity for him to pursue the matter further—and, knowing his indefatigability, I expect to see him in his place on that occasion.

Business Without Debate

Delegated legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Children and Young Persons

That the draft Children Act 2004 Information Database (England) (Revocation) Regulations 2012, which were laid before this House on 1 February, be approved.—(Mr Vara.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Prevention and Suppression of Terrorism

That the draft Schedule 5 to the Anti-terrorism, Crime and Security Act 2001 (Modification) Order 2012, which was laid before this House on 1 March, be approved.—(Mr Vara.)

Question agreed to.

23 Apr 2012 : Column 781

Petition

Darlaston Road Crossing (Walsall South)

10.40 pm

Valerie Vaz (Walsall South) (Lab):
I rise to present a petition from the residents of Walsall South.

The petition states:

The Petition of users of Darlaston Road zebra crossing, near Hough Road in Pleck, Walsall,

Declares that the Petitioners are concerned that there have been a number of accidents and near misses on the Darlaston Road zebra crossing near Hough Road in Pleck, Walsall.

The Petitioners therefore request that the House of Commons urges the Government to call on Walsall Borough Council to immediately install a signal-controlled crossing in place of the existing zebra crossing on Darlaston Road, near Hough Road in Pleck, Walsall, before any further serious incidents occur.

And the Petitioners remain, etc.

[P001020]

23 Apr 2012 : Column 782

Smart Meters

Motion made, and Question proposed, That this House do now adjourn.—(Mr Vara.)

10.41 pm

John Healey (Wentworth and Dearne) (Lab):
I am grateful to have secured this Adjournment debate. I am both a supporter and a sceptic of smart meters. I strongly back the benefits that could come from universal smart meters with the right specifications for all consumers, but I am concerned that the Government need to get a grip on some of the essential elements of the national programme. I am also concerned that consumers will end up footing the big national bill without knowing it. There are, too, already consumer complaints over early installation of smart meters, which could irrevocably damage confidence and the reputation of the programme if they are allowed to escalate.

This is a hugely ambitious prospectus for us all. It was kicked off by Labour when in government, and is now being continued by the coalition. The aim is to install 55 million high-tech gas and electricity meters in all UK households and businesses by 2020. I am told that those involved in the project have as their mantra, “Starting well and finishing early.” If the Government get this wrong, it could end up starting badly, failing to finish and costing the consumer dearly.

Let me start by being upbeat. Our UK smart metering plan has a number of world-first features. It involves both gas and electricity meters; it builds in a requirement for an in-home display for all consumers; it sees installation as being led by energy suppliers rather than the energy distribution and network firms; it has functionality for the consumer, the energy supply companies and the network operators that is far ahead of smart meters in other countries; and it places a single central data communications provider at the nerve centre of the system.

That is why consumer groups, including Which?, as well as energy companies and industry experts, all accept the potential benefits. Those benefits include: an end to estimated energy bills; detailed real-time information on energy use, with options to reduce consumption and bills; new tariffs based on time of use, consumption, carbon emissions and a range of other factors; pay-as-you-go options so we can put an end to the penalty premium that hits the poorest, who use prepayment meters at present; better control of distributed energy generation and microgeneration; easier switching; and, of course, remote connection, disconnection and meter reading without the need for a field work force.

However, the installation of smart meters is showing early signs of problems for consumers. Which?, Consumer Focus and the Office of Fair Trading are all picking up complaints, often about mis-selling, in an industry where consumer protection is still too weak and consumer trust in energy companies is at an all-time low. For instance, we are picking up reports of energy reps cold calling, with the customer believing that the purpose of the visit is to install a smart meter whereas the real purpose is to switch supplier; reports of customers being told that they qualify for a smart meter, as long as they switch supplier; and reports of reps offering free smart meters if people sign up to their energy supplier. The clear rules against any sales on installation visits,

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which the Minister published earlier this month as part of his update on the smart meter programme, should help, but they will help only if they are fully and toughly enforced.

Like all other hon. Members, I received the Minister’s update letter, coincidentally dated today, on the smart meter programme. I thank him for it, but it has little or nothing to say about the areas of greatest concern. Let us call them the four Cs: cost; consumer confidence; controlled testing in trials and proper pilots; and the contract for the data and communications nerve centre.

Jim Dowd (Lewisham West and Penge) (Lab):
I congratulate my right hon. Friend on raising such a significant issue. May I add a fifth C—competition—to the four that he has outlined? If the smart metering programme is implemented optimally, it stands a chance of bringing greater competition into an area beset by the big six cartel. Although there are huge dangers, as there have been with many public sector IT projects over the years, we should not lose sight of the fact that this is an opportunity to regain public confidence in the energy sector, which that cartel has seriously undermined in recent years.

John Healey:
My hon. Friend is absolutely right: a perceived lack of proper competition is responsible for a large part of the loss of confidence among consumers. It is also responsible, in large part, for the frustration of many smaller suppliers, who feel closed out of what should be an open and competitive market. As he will see as I proceed, I pinpoint those doubts about proper competition in this sector as underpinning some of the difficulties that I anticipate this programme may have if the Government do not adjust their approach.

Let me deal with my first C—cost—which is central to this matter. People have seen their energy bills go through the roof recently. Many people are struggling to pay, more report falling behind with their payments and some report being forced to choose between the very basics of eating and heating. They see energy companies making huge profits, little real competition to keep down prices, no help from the Government and no action from the regulator. The cost of the meters in total will be about £12 billion—at least on current estimates. That is more than £100 per smart electricity meter and more than £130 per smart gas meter. All costs are going directly on to the bills of consumers, yet there is no requirement to report these costs or show these costs in consumer bills; there is no guarantee that companies will pass the considerable savings on to the consumers in their bills; and, above all, there is no control over costs of installation, other than the Government’s assertion that market competition will do the job.

The Minister will be well aware that the Public Accounts Committee shared some of those concerns in a report last year. The first conclusion of its report, “Preparations for the roll-out of smart meters,” is:

“Consumers will have to pay energy suppliers for the costs of installing smart meters through their energy bills, but many of the benefits will pass in the first instance to the energy suppliers.”

That paragraph concludes:

“The Department is relying on competition to drive down prices, but Ofgem have clearly found that the energy market is not functioning effectively as a competitive market.”

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That was the point that my hon. Friend the Member for Lewisham West and Penge (Jim Dowd) made so clearly.

At present, the Government are writing a blank cheque for the industry. The Government and Ofgem have some powers under the Energy Act 2011 to obtain information from suppliers on cost and performance, and as a start they should use them directly. The Minister also needs to rethink the membership of the panel he proposes to oversee the implementation of the smart meter programme. It is set out in one of the update papers he published earlier this month, the “Smart Energy Code”, which shows on page 73 that the governance panel to oversee the implementation consists of 13 full members with only up to two consumer representatives, no representatives from companies that specialise in metering and—potentially, as it says “possibly” in brackets—only one Government appointee, who will not have voting rights. The Minister should accept that if the programme is to be perceived as one that is directly tailored to maximise the benefits to consumers, the way he manages it and such arrangements must reflect that intent.

Secondly, on consumer confidence, the net benefits of the programme are said to be on average about £25 a year for a household with both electricity and gas meters. The benefits, both environmental and financial, can only be fully realised if there is widespread take-up and if consumers use the information to reduce their consumption, to change tariffs and to switch suppliers if needed to get the best deal. Confidence, knowledge and trust in the smart meters are therefore essential, but they are also fragile. Fewer than one in four consumers—only 23%—consider energy suppliers to be trustworthy. Allowing them to run the roll-out without clear Government leadership risks damaging confidence in the overall purpose and benefits of smart meters. The Government’s hands-off policy therefore risks the very future of smart meters, and I think the collapse of consumer confidence and the failure of smart meters in other countries, such as Australia and the Netherlands, and in the state of California, are cautionary tales for us in the UK.

My third C is controlled testing and pilots. As the Government are letting energy companies lead the installation of smart meters, activity is patchy. Some suppliers are holding back and one or two others, such as British Gas, are taking a market decision to move fast. British Gas has already installed 400,000 smart meters and tells me that only a quarter will need replacing in the light of the Government’s latest technical specifications and that its trials are producing valuable data and intelligence for the future. A more common view among consumer groups, energy supply companies and industry experts is that a greater grip is required from Government and that prior to the start of the planned roll-out from 2014, all aspects of the programme and its participants should be thoroughly tested. They believe that much greater direction and co-ordination is required by Government of the big energy companies to test different communications links, different ways of getting consumer confidence and the interoperability between suppliers and devices.

In particular, I am concerned that the poorest will be put last. Smart meters should do away for good with higher charges for people who prepay for their energy, but none of British Gas’s 400,000 smart meters replaced prepayment meters and Government work on how

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prepayment will be built into the smart meter specs is being pushed back further into the future. It simply will not happen if each supplier is left to do its own thing, or to do nothing. It must be a higher priority for Ministers to sort out specifying what will be required for prepayment in all smart meters; trialling the installation and use of such meters; and establishing what help is needed for the most vulnerable. The digital switchover is a good example of both what can be done and the scale of what might be needed. I am told that in the Granada region, a team of 7,000 volunteers stood ready to step in to help consumers who were struggling to deal with switchover to make that change.

The fourth C is the contract for the central data communications and data services company. This is required, of course, to link smart meters to suppliers. The PAC, again rightly, warns in the fifth conclusion of its report:

“We expect the Department to take on board the lessons learned from other large Government IT programmes and to ensure that the contracts they place are sufficiently flexible to cater for smart grids and avoid additional costs falling to consumers.”

In my view, the Government have the right approach: as long as levels of security and reliability are sensibly specified, as long as the system is kept as simple as possible, and as long as this is done and tested in good time for the national roll-out, so that the extra costs of modifying or upgrading meters are avoided, the single competitively appointed supplier for data and communications could make the market and the service more efficient. It is certainly better than allowing the 23 active energy suppliers simply to do their own thing.

If that approach is right in principle and in practice for data communications, it is, however, reasonable to ask why a similar, tighter, Government-led approach is not right for meter installation as well. Which? is so concerned that it wants Ministers to call a halt to the current roll-out strategy, which is led by suppliers, to get proper trials under way, and then to restart the roll-out in 2014, so that it works for consumers, who in the end will pay for it.

In conclusion, there are serious questions about how the Government are handling this huge national programme. I hope that Ministers will heed the warnings and adjust the Government’s approach, because this is an area where I and millions of hard-pressed consumers paying high electricity bills all want the Government to succeed.

10.58 pm

The Minister of State, Department of Energy and Climate Change (Charles Hendry):
As the right hon. Member for Wentworth and Dearne (John Healey) said, less than three weeks have elapsed since we published a number of smart metering consultations and decisions. The debate is therefore timely and I congratulate him on securing it and commend him for the measured way in which he introduced it, supporting the ambition but raising realistic, sensible and constructive questions about how it is being taken forward. I assure him that the Government are alive to the issues and that, for us, the interests of the consumer are at the heart of the programme. It is the consumer experience that will determine its success, and if consumers do not have the experience we want, it will not deliver and satisfy the ambition we all share.

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I agree with the right hon. Gentleman that the roll-out of smart meters will unlock huge benefits for consumers. We have brought forward the timetable because we think those benefits are so substantial. We want every home in Great Britain to have a smart meter and an in-home display by the end of 2019, enabling people to manage their energy consumption and reduce their carbon emissions.

The roll-out will play an important role in Great Britain’s transition to a low-carbon economy and will help us to meet some of the long-term challenges that we face in ensuring an affordable, secure and sustainable energy supply. This is a huge and challenging project. It is one of the largest and most comprehensive smart metering projects in the world, and it is the largest change-over programme in the energy industry since the introduction of North sea gas about 40 years ago.

The smart meter implementation programme must ensure that the roll-out is achieved in a cost-effective way, and the benefits to consumers and to industry need to be maximised. We have completed the first year of the foundation stage, which is critical preparation for the mass roll-out that will start in 2014. The publications on 5 April represent a key milestone in the implementation programme. They provide further detail on the technological and regulatory framework, and they set out substantial new proposals for engaging and protecting consumers throughout that period.

Of course, there would be little point in such an undertaking without its bringing real and substantial benefits. Alongside our recent consultations, we have published updated economic impact assessments. These show a slight increase in the net benefits over the previous assessments, resulting in total net benefits of £7.2 billion over the next 20 years. For me, the consumer benefits will always be at the heart of the smart meter programme, so in my comments I shall focus on how we are working with industry and consumer groups to make sure that smart meter installation delivers all it promises for consumers.

Most importantly, smart meters will give consumers near real-time information on their energy consumption to help them control their energy use, save money and reduce emissions, but as the right hon. Gentleman says, for smart meters to work effectively, the consumer needs to know how to work with them. Smart meters will bring an end to estimated billing, so no more surprises for consumers, and switching between suppliers will be smoother and faster. When consumers want to switch because they feel that the companies are not passing on the benefits that they expect from the smart meter programme, they will be in a stronger position to do so. We expect that new products will be supported by a more vibrant, more competitive and more efficient market in energy and energy management.

We know that for consumers to realise all the benefits, an effective consumer engagement strategy will be needed—one that can ensure that consumers have confidence in the benefits and are reassured when they have concerns, and one that helps them to understand how to use their smart meters and better manage their consumption. More importantly, we need to recognise that some vulnerable consumers may struggle to access all the benefits of smart meters without additional help. In short, we need to place consumers’ interests at the heart of the roll-out, and on 5 April we announced a package of measures designed precisely to do that.

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Fundamental to consumers’ experience of smart metering will be the installation visit. That is why we are setting rules through a licence-backed code of practice to make sure that consumers have a good experience throughout the installation process, and that they are given the information they need to understand how to use their new meter and display, and how both can help them to use their energy more efficiently. We consulted last year on rules governing installation, and our recently published documents included our response to the consultation. They will place licence obligations on installing suppliers to offer customers an in-home display, allowing them to see what energy is being used and how much it is costing, as well as requiring suppliers to provide efficiency advice as part of the installation visit. Suppliers must also identify and meet the needs of vulnerable consumers, whether by arranging for a relative or carer to be present at the installation or by providing additional help in understanding and using the in-home display.

We have also been clear that householders should not be subject to unwelcome sales or marketing in their own home, an experience that would be a huge turn-off for many and would risk putting vulnerable consumers under unacceptable pressure. The licence conditions for the code will therefore ban any sales during the installation visit, and they will require that suppliers must obtain consumers’ permission in advance of the installation visit if they are to talk to them about their own products. In all those areas we have been strongly guided by the interests and views of consumer groups.

The code of practice will be developed by suppliers and approved by the regulator. It is right that suppliers should develop the code of practice because they know their customers, and they will be at the front end of installation, but if suppliers fail to submit an acceptable code, Ofgem will be able to direct changes or designate another code in its place. Ofgem will be able to take enforcement action if any supplier breaches the code.

Efficient and customer-focused installations will be essential if we are to engage customers and help them to understand smart meters and the opportunities they bring. However, the Government, industry and others recognise that the action of individual suppliers on its own will not be enough. Building the confidence and trust of all consumers—an issue to which the right hon. Gentleman understandably referred—and reaching out to vulnerable or hard-to-reach consumers, needs consistent and co-ordinated communications. We know from research that third parties such as voluntary organisations, local authorities, and housing associations, as well as friends and family, can provide an effective and more credible source of information than either suppliers or central Government. We are therefore consulting on a consumer engagement strategy that would include a central delivery system delivered by suppliers, but with independent direction and external advisory input.

Giving suppliers the responsibility to establish and fund a central body is right in the context of a supplier-led roll-out. It means they can establish arrangements that support their own engagement activities. It also means that efforts designed to raise awareness of and support for smart metering will sit alongside those tasks designed to encourage behaviour change. Of course, it will be important for a central body to reflect wider public

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policy and consumer interests. The consultation also therefore seeks views on the governance arrangements needed to ensure that a central body delivers the consumer engagement objectives, for example, by proposing an independent board and an advisory board with consumer expertise, and we will take into account the concerns that the right hon. Gentleman expressed on that board set-up.

Consumer engagement also offers the possibility of synergies with other energy policies. Smart metering will support the green deal by encouraging choices that increase energy efficiency, and we are encouraging suppliers to bring together smart meter roll-out with the delivery of obligations such as the affordable warmth element of the energy company obligation. Bringing those together will provide not only efficiency savings but a more comprehensive package for vulnerable and low-income consumers. An essential part of the strategy will be continual monitoring of the delivery of smart meter consumer benefits from the foundation stage onwards. Ahead of the roll-out we will be looking at the results of suppliers' trials and of community-level engagement. Where benefits are not being delivered we will take further action.

As the right hon. Gentleman has said, there is one group of customers who typically already engage with their energy consumption in a different way from most consumers, and those are the prepayment meter customers. As prepayment customers are often already more aware of their energy use and costs, our impact assessment forecasts a lower level of gas savings in particular from that sector. However, we believe that smart metering still has the potential to bring significant benefits to prepayment customers. Every smart meter will have the functionality to operate in either prepayment or credit mode, so the meters enable easy switching between the two payment methods as customers' circumstances change. Smart meters will allow more convenient ways of topping up payments, such as by phone, cash points or online, which should make prepayment appeal to a much wider group of customers. They will also enable periods to be set when disconnection will be prevented, for instance to stop customers losing supply overnight or when shops are shut.

Another important area of consumer protection addressed in our recent consultations is the need to protect the privacy of individuals and make sure they have control over the data recorded by the smart meter. The principle that has been absolutely critical to our thinking in this area from the start is that consumers must have a choice over who has access to their smart meter data, except where the data are needed to fulfil regulated duties. Suppliers need access to a certain amount of data for billing and to fulfil statutory requirements or licence obligations. For these purposes, we are proposing in our consultation that suppliers can have access to monthly data without consumer consent. If suppliers wish to access daily data, we propose that they may do so but that they will have to provide a clear opportunity for the consumer to opt out and that the data cannot be used for marketing without the customer's explicit consent. Beyond that, if suppliers wish to access half-hourly data—for instance, to develop more sophisticated services for consumers, such as the time-of-use tariffs to which the right hon. Gentleman referred—they must obtain explicit consent from the consumer to do so.

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It will not just be suppliers who will wish to access data from smart meters; a range of other parties, including individual consumers, network operators, energy service companies and online switching sites, might all have reasons for using data. Our principle—that consumers should have a choice about how their data are used and by whom—will also apply in this regard. Steps are being taken to ensure that consumers are able easily to access their own consumption data and share them with third parties, such as switching sites, should they wish to do so.

We are also requiring that 13 months of data can be stored in the meter itself and that it is accessible to the consumer. That will ensure that the consumer has control over and can access their own data even if they have no wish to share it with other parties. Meanwhile, we have

23 Apr 2012 : Column 790

embedded security in the technical design of the meters to ensure that personal data are properly stored.

I hope that I have been able to reassure the right hon. Gentleman about this massive and challenging project. We have come a long way and the publication of key consultations and conclusions earlier this month marked another milestone on the way to mass roll-out. I am grateful to him for securing the debate and hope that what I have been able to say shows that we are absolutely putting consumers’ interests at the heart of the roll-out, because for us that is integral to its success.